Testing out contractual incompleteness
Subtitle: evidence from soccer
By: Oriol Carbonell-Nicolau, Diego Comin.
Contributors: Comin, Diego.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 11110.; Working paper series (National Bureau of Economic Research) -- working paper no. 11110.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 47
Subjects: Contracts -- Econometric models; Professional sports contracts -- Spain
Description: "The theory of incomplete contracting is rival to that of complete contracting as a frame of reference to understand contractual relationships. Both approaches rest upon diametrically opposed postulates and lead to very different policy conclusions. From a theoretical viewpoint, scrutiny of the postulates has revealed that both frameworks are reasonable. This paper designs and implements an empirical test to discern whether contracts are complete or incomplete. We analyze a problem where the parties' inability to commit not to renegotiate inefficiencies is sufficient for contractual incompleteness. We study optimal contracts with and without commitment and derive an exclusion restriction that is useful to identify the relevant commitment scenario. The empirical analysis takes advantage of a data set from Spanish soccer player contracts. Our test rejects the commitment hypothesis, which entails the acceptance of the existence of contractual incompleteness in the data. We argue that our conclusions should hold a fortiori in many other economic environments"--National Bureau of Economic Research web site.
Notes: "February 2005."

Includes bibliographical references (p. 45-47).

Also available in PDF from the NBER world wide web site (www.nber.org).